FPI holding

Ownership in the stock market is not just about buying and selling shares. It can also reflect how much of a company, sector, or country is held by investors. When too many investors hold shares in a particular company or sector, it is called over ownership. On the other hand, under ownership happens when investors hold less than usual. Understanding this balance helps in seeing the trends and predicting market behavior.

Foreign Investors’ Role in Indian Equities

Foreign Portfolio Investors (FPI) play a significant role in the Indian stock market. Back in 2012, FPIs held about 16% of Indian equities. This means foreign investors owned that percentage of stocks available in the Indian market. Over time, this percentage grew. By the end of 2014, FPI holdings increased to around 20%. This higher percentage indicated strong foreign interest in Indian markets, but it has since stabilized around 19-20%.

Impact of the COVID Pandemic on Foreign Holdings

During the COVID-19 pandemic, the global market was affected, and so was India’s. Foreign investments in Indian stocks started to decrease. By 2023, FPI holdings had fallen back to about 16%, the same level as in 2012. This drop is shown by negative outflows, where foreign investors were pulling their money out of the Indian market. Despite this, the interest in Indian markets remains high, as India continues to offer attractive growth opportunities compared to other countries.

Why India Continues to Attract Investments

Even though foreign investors reduced their holdings during the pandemic, they still find India a compelling market. This is because few other countries offer the kind of growth potential that India does. Foreign investors are hesitant to sell all their holdings because they may not find the same growth opportunities elsewhere. India’s market may seem expensive, but the possibility of long-term growth keeps these investors interested.

The Future of Foreign Investments in India

According to recent data, it seems that FPI outflows might have reached their limit. This means that further selling by foreign investors may be unlikely in the coming months or quarters. If domestic investments continue to perform well, and foreign sell-offs slow down, the Indian stock market could build a solid base for future growth. This could offer a strong opportunity for the market to move forward and see new gains.

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